Suggested solutions and answers: Applying IAS 8

Requirement 1:
Profit for 2015
Adjustments
a. Interest receivable, 2014
Interest receivable, 2015
b. Repairs expense, 2014
Repairs expense, 2015
c. Prepaid insurance, 2014
Prepaid insurance, 2015
d. Depreciation on office equipment
e. Reversal of amortization
Adjusted profit for 2015

$36,320
(1,000)
2,250
8,000
(10,200)
(450)
250
(1,600)
1,200
$34,770

Requirement 2:
Retained earnings, Jan 1, 2016
Adjustments:
a. Interest receivable, 2015
b. Repairs expense, 2015
c. Prepaid insurance, 2015
d. Understated depreciation, 2014
e. Capitalization of equipment
f. Derecognition of R & D
Adjusted Retained Earnings

$66,600
2,250
(10,200)
250
(3,000)
6,800
(4,200)
$58,500

Requirement 3:
Date
2015
Dec. 31

Particulars
Interest receivable
Interest revenue
Retained earnings
Repairs expense
Retained earnings
Repairs payable
Prepaid expense
Insurance expense
Retained earnings

Debit
$

Credit

2,250
$
2,200
8,000
10,200
250
200
450

Retained earnings
Accumulated depreciation

3,000

Office equipment
Depreciation expense
Accumulated depreciation
Retained earnings

10,000
1,600

Accumulated amortization
Retained earnings
Amortization expense
Patent

1,250
1,000

3,000

4,800
6,800
3,000
4,200
1,200
6,000